East Coast Vs. West Coast, Public Vs. Private

May 1, 2012       Mark Hrywna      

Fundraising at colleges and universities is not unlike the madness that surrounds the NCAA’s annual basketball tournament. The big, major conference schools can dominate at times but the smaller, so-called mid-major schools often give their bigger rivals their comeuppance in a shocking upset.

When it comes to raising money, public schools have been gaining on the privates over the years — California’s public colleges, in particular — as new philanthropy on the West Coast has gotten into the game.

Raising the most money still comes down to size in most cases, as the 20 schools that raised the most money accounted for more than one-quarter of all gifts to higher education during 2011. Many on that list are among the oldest and largest in the nation. Smaller schools can raise sums of money that are large, for them, but not quite in the stratosphere of the likes of Harvard, Stanford or Duke.

Of the top 20 schools that raised the most in donations, six are located on the West Coast and 10 on the East Coast. To be sure, “flyover country” boasts a few big ones too: the universities of Texas, Wisconsin, Minnesota and Indiana University, made the top 20, and several other Big 10 schools are within the top 30.

But really, geography plays but a small part among the myriad factors that come into play when raising $30 billion. That’s the amount of money raised by colleges and universities in charitable contributions last year, an increase of 4.8 percent compared to 2010, when adjusted for inflation, according to the Voluntary Support of Education (VSE) survey by the Council for Aid to Education (CAE) in New York City. The increase in giving to the top 20 schools ($1.12 billion), accounted for almost half of the increase to all schools ($2.3 billion).

“The (top 20) list can be somewhat deceptive because it does not recognize scale and mass,” said Michael Schoenfeld, vice president of public affairs and government relations at Duke University. “Ten million, $20 million or $50 million in annual fundraising for a very small college would be huge. For a place like Duke or North Carolina, it would not,” he said.

The list of top schools is rarely surprising because giving tends to follow economic indicators, according to Ann Kaplan, VSE’s director. “When capacity to give is there, giving usually follows suit,” she said. Americans like success and that can help drive donations, too. “I think there’s a self-perpetuating phenomenon,” said Mel­is­sa Brown, principal of Melissa Brown & Associates and a former author of Giving USA, the annual tracking of American giving. If given a choice of donating to an Ivy League school or a relatively new school, a donor might select the organization that has the long track record. “In general, we like to invest in something that is certain to endure,” she said.

There are pockets of wealth everywhere: Boston, New York, Los Angeles, Seattle, Silicon Valley. “Part of the wealth generated on those two sides of the country is clearly related to the impact of having strong research universities there,” said Connie Kravas, vice president of advancement at the University of Washington (UW). Many programs have been initiated or catapulted to world-class levels at UW because they matter to Washington-based companies, like Boeing and Microsoft, as well as foundations. “They’re symbiotic relationships,” she said.

“It’s true that a lot of new philanthropy is coming from the West Coast,” said Robert Kissane, president of Community Counseling Service (CCS), a fundraising consulting firm in New York City. A lot of very large gifts are coming from Silicon Valley and private equity, he said, and major businesses, wealthy graduates and trustees, and even parents make large gifts to these schools. Significant gifts are going to institutions like Yale, Harvard and Massachusetts Institute of Technology (MIT), according to Kissane, all of which are in the top 20. Programs that are expensive, that people want to fund are doing leading-edge technology, science, medical research. Several have individual, high eight- and nine-figure donors.

“On the West Coast, what’s happened is the publics (schools) realized they have to get into this game. The tax dollars are really evaporating,” said Debra LaMorte, New York University’s senior vice president for development and alumni relations. “I think you’re going to see a really big push for them to start to raise private philanthropic dollars, put them front and center in big campaigns, and really beefing up their development efforts,” she said. “On the East Coast, it’ll be more business as usual, because there are more private universities here.”

LaMorte described New York City as the philanthropic capital of the world. “That’s a good thing because the citizenry understands how important philanthropy is. It’s a bad thing because it’s so competitive; everyone knows that the philanthropic dollars are here,” she said.

Private Versus Public

Potential donors often don’t realize the importance of private giving for public institutions, especially in California. Instead, they notice the sharp tuition increases necessary to help shore up the loss of state funds, and conclude that the university doesn’t need their help.

“For the most part, you’re looking at older alumni, more than 25 years or even 50 years out, who are in position for really big gifts,” said David Blinder, associate vice chancellor of university relations at University of California-Berkeley. “Those are people who were coming to Berkeley when the tuition was virtually free. Their perception is: ‘The state takes care of the basics, so I want my gift to really do something special.’”

That perception is in sharp contrast to most private universities. From the moment freshmen set foot on campus at places like Harvard or Yale, they are inundated with the message that “it’s private philanthropy that’s the lifeblood of the institution,” according to Blinder. And Blinder would know; before joining Berkeley he worked at Wellesley College in Massachusetts and Princeton University in New Jersey, both private schools.

Generally, the reason private universities raise more money is simply because they have been in the fundraising business for a longer period of time. But public colleges have been getting in on the action in recent decades.

“Public used to be publicly funded, and there was no paradigm for public institutions raising money. The line between public and private was just much more clear decades ago than now,” said VSE’s Kaplan. “Those institutions have been developing fundraising programs much more recently.” “Private universities were built on private philanthropy, so there’s a tradition, sometimes going back hundreds of years, supporting the university,” said Schoenfeld. “It’s obvious to anyone at a private university, especially a major private university or liberal arts college that you wouldn’t be here today if it wasn’t for the donations and contributions of someone who came before you,” he said.

Big Time Sports

Athletics might help when it comes to college fundraising, but not really all that much. They attract a big share of the spotlight, if not the gifts. At Duke University for instance, athletics were responsible for only about 7 percent while Duke Medicine accounted for almost 40 percent of the $349.6 million raised last year from more than 106,000 donors. Some studies show that athletics can be a detriment to fundraising, diverting energies to building a strong athletics program and getting television airtime instead of focusing on academic mission, Brown said. Still, others argue that at a big brand like Duke, athletics do help, especially among alumni, she added.

“Athletics are a unique front door to the university for fundraising purposes,” Schoenfeld said, adding that it’s “certainly a component” of success in fundraising. “We have been very successful in private fundraising for athletics. But we also, because we have highly visible program, benefit from the visibility of athletics. Typically, people who give to places like Duke have multiple interests throughout the university; athletics might be one, but it also might be financial aid, music or neuroscience,” he said.

Kissane of CCS said there’s no doubt a correlation between athletics and alumni interest. “You see spikes when schools do well. Athletics programs provide a wonderful opportunity to get alumni together, to talk about the school. There are residual benefits to athletic programs. They just bring people together and galvanize alumni in a lot of ways,” said Kissane. Alumni giving isn’t typically more than 10 or 11 percent at public schools, said Brown. What’s often more relevant is the field that students go into, particularly finance or technology. “Some are generating significant amounts of money,” she said.

“Part of it also has to do with the alumni base. Think about what alumni of Harvard go on to do. Their selection criteria suggests they’ll go off and be world leaders. The donor base is probably in a better position to make very significant gifts,” said Brown.

Athletes might be the superstars on television, but when it comes to fundraising, it’s the medical schools and researchers that really bring home the bacon for universities. As any development director will tell you, fundraising is all about relationships. That relationship isn’t just with donors but — especially at universities — with grantmaking foundations.

Corporations and foundations are an area where Duke is consistently among the top recipients, said Schoenfeld, with much of it related to medical research. Medicine can account for as much as one-third of this money, sometimes more, at some schools, according to Kissane.

“Medicine and biosciences play a big piece,” said Kissane. Institutions classified as research/doctoral raised about two-thirds of the overall $30 billion brought in by universities, according to the CAE survey, more than all other categories combined (masters’, baccalaureate, specialized and associate’s).

Speaking anecdotally, Kravas said she believes there’s a strong correlation between the ability to attract federal research grants that are competitively awarded and the school’s ability to raise funds. Year in and year out, UW is among the top universities in the country when it comes to these research grants. “It always really surprises people, even here in Seattle,” she said.

About three-quarters of UW’s alumni reside in the state but even if they originally came from somewhere other than Washington, alumni are more likely to remain within a 100-mile radius of the university, according to Kravas.

“What we do a lot of is ‘big idea’ fundraising versus loyalty fundraising,” said NYU’s LaMorte. “We’re a commuter school, we don’t have that alumni structure. We need to be much more entrepreneurial in our structure. We come up with good ideas, and then attract people — sometimes alumni, sometimes not — who want to make an investment in NYU.”

State Support Dwindles

Throughout much of the nation, state support of higher education has dropped off, particularly since the recession, and nowhere has that been more evident than in the Golden State.

“Historically, gifts were focused on areas where the state wasn’t providing any funding. Now, as state support has decreased, we’re looking to expand uses of gifts and support to try to alleviate the budge cuts the university is facing,” said Geoff O’Neill, assistant vice president for institutional advancement in the University of California’s Office of the President, also known as Regents.

Per-student state support is about half of what it was a decade ago, estimated UCLA spokesman Phil Hampton. “Fundraising is increasingly important, but it’s important to understand that gifts are not a primary form of operating revenue. They generally can’t be seen as a replacement of state funds. While there certainly is an increased emphasis in fundraising, philanthropy is not a replacement for a loss of state funding,” he said.

As recently as 2009, state funding comprised about 13 percent of the revenue for the University of Washington. Last year, state funding made up 7 percent.

“State funding has declined for University of California as a whole and we are looking to increasingly rely on philanthropy to help us maintain our excellence as a university,” said Steve Downs, executive director of university development and alumni relations, at UC-San Francisco. “We don’t see ourselves as competing with the other University of California institutions for donors. We all have our strengths, and our donors recognize that,” he said. The University of California does have a coordinating role in institutional advancement at the office of the president in Oakland, he added, but each campus has a fully functioning development operation of its own.

“We’ve built a national reputation. We have a strong presence in the San Francisco Bay area, but we’re also finding we have an impact on people outside the Bay area, nationally and internationally," said Downs.

In general, each UC campus has a dedicated fundraising staff, and very little “front line” fundraising is done from the Office of the President, according to O’Neill. This past fiscal year, UC raised almost $1.6 billion in philanthropic support. Roughly $5.5 million was for system-wide programs. Donors to UC can give directly to the Regents, which will distribute the gifts to whichever campus or program is specified, or directly to one of 10 campuses through the university foundations. The money all flows to the same place, which is wherever the donor wants or, in the case of unrestricted gifts, wherever it’s needed most.

In general, donations to the Regents and to individual campus foundations are relatively even; Regents received $775 million in donations, while the 10 foundations collectively raised $813 million last year, making 2011 the first time foundation giving outpaced giving to the Regents. Hooking donors young is key to stewarding them for a lifetime. Blinder said if alumni make a gift three years in a row, they’re likely to make a gift in the fourth year. And, if they make a gift in the fifth year, they usually become lifetime donors. Age matters, and California has a major advantage in Silicon Valley, where it’s relatively easier to get rich younger than elsewhere in the country.

And campaigns are getting larger and larger in recent years. In 2007, the University of North Carolina exceeded the $2-billion goal for its “Carolina First Campaign.” Yale University’s Yale Tomorrow campaign exceeded its $3.5-billion goal, with $3.886 billion in 2011. The Stanford Challenge also ended last year, generating $6.23 billion.

In 2004, Duke raised $2.36 billion in a campaign, at the time among the largest for any private university. The Durham, N.C. school is preparing for its next campaign soon, Schoenfeld said. “Since then, a lot has changed,” he said. “The size of fundraising goals continues to increase. Multibillion-dollar campaigns now are no longer unusual, they’re almost expected.” NPT

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